Argentina: "We Choose Default And Massive Poverty!"??
On Dec. 19, 2001, Argentina finally suffered governmental
disruption from the Crash...or more precisely, its failed efforts
to use a currency peg to the U.S.$ to dodge it. Massive rioting by
decisively unmalnourished protesters (cf. mass media photographs)
claiming to be starving drove out the de la Rua government, which
had proposed to avoid default by cutting both pensions and public
wages...only two days before.
The first thing the new Peronist government did was declare
immediate default on all foreign-held Argentinian government bonds.
The inflammatory rhetoric surrounding this declaration was
deliberately calculated to convince by emotional reasoning. Whether
the new government has any idea what their citizens have chosen to
be condemned to, is dubious. It should be noted that since over
half of Argentina's debt is denominated in U.S.$, that explicit
devaluation is disastrous. This also puts serious intrinsic
downward pressure on their currency. The only theoretically viable
options are thus currency peg, or dollarization. Both have definite
The Prelude and Aftermath of Argentina's Democratic Choice to Default
November 2 2004 [BBC]
Sept. 17 2004 [CNNMoney]
- Argentina is continuing to hold the line on its 25 cents on the dollar debt restructuring proposal.
July 29, 2004 [VOANews/BBC]
- Argentina's government replaced its central bank chief Alfonso Prat-Gay Friday with Deputy Foreign Minister Martin Redrado.
No immediate policy changes are expected, although behind-the-scenes disagreements in policy between Kirchner and Prat-Gay are suspected.
June 2, 2004 [VOANews]
- An IMF internal report said the IMF supported an unsustainable currency peg throughout the 1990's, and did not cut off support after it
was clear the then-current regime lacked fiscal discipline. The report recommended constructing stop-loss contingency plans,
and taking political obstacles more seriously.
March 9, 2004 [CNNMoney]
- Argentina has floated a revised debt restructuring proposal: 25 cents for every dollar owed, plus interest accrued since
default in Dec. 2001. [Formerly, 25 cents for every dollar owed, no interest.] Evidently, the Global Committee of Argentina
Bondholders (based in New York, representing investors holding U.S.$37 billion in Argentine government bonds) does
not believe this unacceptable offer is as final as claimed by Argentina's Economy minister Roberto Lavagna.
February 21, 2004 [BBC]
- Argentina announced that it would make a U.S.$3.15 billion payment to the IMF due today. This was the price of keeping
a U.S.$13.3 billion loan deal alive at its review on March 23, 2004, in the face of questions of whether Argentina is negotiating in good faith with
its creditors holding defaulted Argentinian government bonds (current spread being 25% face value [Argentina, rejected by IMF] vs. 65% face value [creditors]).
January 29, 2004 [VOANews]
- Argentina followed up on a 2002 GDP decline of 10.9% with a 2003 GDP increase of 8.4%. However, over 50% of the population
is still below the poverty line.
Dec. 23, 2003 [CNNMoney]
- The IMF has completed its first review of Argentina's economic reforms under a three-year long program. This
cleared the way for Argentina to receive an additional U.S.$358 million in funds.
Sept. 22, 2003 [CNNMoney]
- In response to anti-IMF rhetoric from Argentina's President Nestor Kirchner (about when the IMF must decide whether
to approve its first review of a U.S.$12.6 billion loan program), the IMF sent a mission on a surprise visit to express
concerns about whether Argentina is negotiating its U.S.$88 billion defaulted debt in good faith. It also appears that
previously agreed targets on bank sector reforms, and utility tariffs, are not being implemented on schedule.
Sept. 12, 2003 [VOANews]
- Argentina wants to restructure its debt to private creditors by slashing the face value by
75%. So far, the main response has been to foreclose on Argentinian government property. I would
be more confident about European efforts on property located in Europe, than Japanese efforts
targeting properties in Patagonia. A judge in New York granted a 45-day period for Argentina to
complete its restructuring before Argentinian assets in the U.S. were subject to seizure.
Sept. 11, 2003 [BBC/VOANews]
- Having obtained the refinancing deal, Argentina went ahead and made the U.S.$2.9 billion
payment to the IMF out of foreign reserves.
Sept. 10, 2003 [MSNBC/VOANews]
- Argentina gained key concessions in its deal with the IMF: no deadlines either for
compensating banks for devaluing the Argentinian peso, or for raising public utility prices.
However, the mere existence of the deal is provoking mass protests.
May 15, 2003 [BBC/VOANews]
- Argentina has decided not to tap U.S.$13.5 billion in foreign reserves to make
a U.S.$2.9 billion payment due to the IMF. This puts Argentina in default to the IMF
as it tries to negotiate a rollover of U.S.$12.5 billion owed to the IMF over the next
three years (through 2006). It is expected that the IMF needs the deal more than Argentina, in
that it has (historically; Jan. 2003) backed down on reform demands for Argentina rather than
tolerate a default for a noticeable period of time.
March 5, 2003 [MSNBC]
- Carlos Menem, in spite of winning the first round of votes in April, has dropped out of
the runoff presidential election. This means Nestor Kirchner (former governor of the Patagonian
province of Santa Cruz) wins by default. It is unclear what prompted this. Kirchner is
expected to maintain many of the policies set by the current president, Eduardo Duhalde.
January 23, 2003 [MSNBC]
- Argentina's Supreme Court ordered the state-owned Banco de la Nacion to restore
the original dollar value of a U.S.$247 million deposit held by the provincial government
of San Luis. It is unclear how much this precedent can be applied to more typical accounts.
January 16, 2003 [BBC]
- Argentina's peso has stabilized at about 30% of its value before floating. This has made
Argentinian textiles, auto parts, and paper competitive with imports. Foreign investment is
also starting to occur more often.
December 9, 2002 [BBC]
- Argentina has successfully made a U.S.$1 billion debt payment to the IMF, avoiding a default.
This coincides with the signing of a new letter of intent with the IMF for refinancing U.S.$6.6
billion in IMF loans. In contrast, Argentina did default on a U.S.$681 million debt payment to
the Inter-American Development Bank earlier this week.
December 2, 2002 [Xinhua]
- Argentina's Central Bank head, Aldo Pignanelli, has resigned. This appears to be due to
key policy conflicts with the finance minister. In particular, Aldo wanted to tap central bank
reserves to make the full World Bank payment on Nov. 14, 2002...a repeat of this default apparently
will cut off IMF funding as well as World Bank funding. The final incident was when the central bank
was coerced into preventing the collapse of a state-controlled bank from account withdrawals.
November 22, 2002 [Xinhua]
- The previously announced 'unfreeze' also affected current accounts, as well as savings accounts.
Some formally less-liquid accounts are still affected.
November 14, 2002 [BBC/CNN]
- Argentina's Economy Minister Roberto Lavagna announced plans to lift a freeze on savings
accounts on December 2, 2002. Price increases for electricity and gas are also proposed, although these are definitely
less than IMF requirements.
September 23, 2002 [MSNBC]
- In order to prevent central bank reserves from falling below U.S.$9 billion, Argentina defaulted
on an approximately U.S.$805 million prinicipal payment to the World Bank. Interest of approximately
U.S.$77 million was be paid. A planned repeat, on December 14, 2002, is expected to freeze further funds from the World Bank.
September 14, 2002 [Xinhua]
- Spain's Telefonica phone company branch, in Argentina, reported that 125,000 miles of its
copper wires (500 tonnes) has been stolen so far this year. While this has been a long-standing
problem, it has been dramatically worsened this year. Buenos Aires, Mendoza, and Patagonia are
noted as being especially affected. Furthermore, some of this copper is being exported: U.S.$195 million
worth of copper was exported from January 2002 to June 2002 inclusive. Argentina has never
exported copper (significantly) before.
September 11, 2002 [BBC]
- Argentina's President Eduardo Duhalde said that improving the "productive system" was
essential to obtaining cash flow for repaying foreign debt. He considers IMF refinancing for
Argentinian exports to be very useful towards this end.
September 5, 2002 [MoneyCNN]
- The Argentinian debt swap of July was used for only 15% of its intended allowance.
Economy Minister Roberto Lavagna announced a more competitive plan, which is hoped to
affect up to 60% of longer-term bank savings. This time, each saver will be allowed access
to 7,000 pesos (some cases get slightly more), which may be taken either as cash or
dollar-denominated Argentinian government debt with a guaranteed highly favorable exchange
August 30, 2002 [Xinhua]
- The IMF granted the extension Argentina had requested. The IMF managing director, Horst Koehler,
confirmed Atanasof's comments about lack of political consensus: the submitted Argentinian plan
was weeks late, and not sufficiently aggressive to actually do anything about Argentina's
August 29, 2002 [MoneyCNN]
- Argentina sought a one-year waiver on U.S.$2.78 billion in interest payments, owed to the IMF,
due Sept. 9, 2002. Alfredo Atanasof (Duhalde's Chief of Staff) said that the lack
of political consensus had to be solved by the voters, as it was beyond Duhalde's
adminstration. Elections are currently scheduled for March 2003.
August 23, 2002 [BBC]
- IMF spokesman Tom Dawson said that while Argentina's situation has been stabilized,
there are still widespread problems. Also, the lack of an Argentinian political consensus
makes it difficult to identify any plan of action.
August 19, 2002 [BBC]
- Argentina's Supreme Court has sabotaged negotiations with the IMF by ordering the government
to undo a 13% cut in salary imposed by Domingo Cavallo (and not reversed before now).
Unfortunately, it is unclear what means, other than hyperinflation, the government can use to
obtain the funds to implement the ruling.
July 25, 2002 [Xinhua]
- From July 14 to August 6, 2002, about U.S.$60 million more was deposited in banks than was
withdrawn. About one third of this was denominated in pesos. The rest of it was denominated
in U.S.$. By comparsion, in January 2002 through June 2002, almost one third of the savings in
peso accounts (more than U.S.$6 billion) was withdrawn.
July 16, 2002 [BBC]
- Alfredo Atanasof, head of Argentina's cabinet, announced that the government had ordered
a 120-day suspension of appeals which force banks to return withheld deposits. Since
Argentina's Supreme Court is on summer vacation, it has not officially commented yet.
June 28, 2002 [CNN]
- Argentina has obtained a year's extension on the repayment of a key IMF loan. This enabled
Argentina to avoid defaulting on another loan from the Inter-American Development Bank.
June 25, 2002 [BBC]
- The French utility Suez made another provision of 500 million euros to cover economic risks
in Argentina. This is expected to reduce its risk from Argentinian activities to zero. Analysts
at Aurel Leven estimate that this will reduce Suez' profit by 17%, to an estimated
1.45 billion euros from an estimated 1.70 billion euros. Suez is also resorting to a procedures
from a bilateral treaty between Argentina and France to negotiate corrective or restorative
measures for damages caused by Argentina's actions. Failure of these negotiations could result
in a drastic scaling down of future activities by Suez in Argentina.
June 21, 2002 [Xinhua]
- Argentina's Central Bank promoted Aldo Pignanelli from vice president to president, in
the wake of Mario Blejer's resignation.
June 21, 2002 [BBC]
- The European Bank of Latin America (BEAL) has decided to totally refund all Argentinian deposits in
its accounts and shut down Argentine operations. This uses up U.S.$31.6 million of its
U.S.$32.7 million reserves. Losses to this point since devaluation are on the order of U.S.$100 million.
June 9, 2002 [CNN]
- Argentina's Central Bank President Mario Blejer plans to resign by June 30th, 2002.
This appears to be due to policy conflicts with Argentina's Economy Minister Roberto Lavagna,
and/or the refusal of Argentina's Congress to grant immunity to (frivolous?) lawsuits opposing
the corrective measures required.
June 8, 2002 [CNN]
- Argentina's Finance Secretary Guillermo Nielsen announced that banks may, at their
discretion, unfreeze savings accounts deposits as cash as an additional option to
the priorly announced government bond plan. Unfortunately, it is unclear what the legal
exchange rates for this purpose will be.
June 6, 2002 [BBC]
- Argentina's President Eduardo Duhalde was surprised by the IMF's decision to consider the
economic subversion law condition unsatisfied -- after Argentina's Congress had started
deliberations to precisely clone it in new legislation. Duhalde hopes fairly minor tweaks
will enable the new legislation to avoid the unwanted effects of the old legislation.
June 1, 2002 [Xinhua]
- The IMF announced that it would resume negotiations with Argentina regarding future loans.
The main conditions on this were:
- creditor protecting changes to Argentina's bankruptcy law
- foreign investor protecting changes to Argentina's economic subversion laws
- implementation of spending cuts by Argentina's provinces
May 31, 2002 [Xinhua]
- Argentina's Economy Minister Roberto Lavagna announced a plan to convert savings accounts to
government bonds. All depositors had the option of a 5-year maturity bond denominated in Argentine
pesos, or a 10-year maturity bond denominated in U.S.$. The elderly (older than 75) also had
the option of a 3-year maturity bond denominated in U.S.$. This plan still has to be approved
by Argentina's Congress.
May 31, 2002 [Fox]
- Argentina's Senate voted 35-34 to repeal the 1974 law criminalizing capital flight, which
the IMF had required the repeal of in exchange for even considering more aid.
May 30, 2002 [CNN]
- President Eduardo Duhalde signed a decree that would eventually phase out a six-month
freeze on bank accounts.
May 23, 2002 [CNN]
- This is the last day for the Senate to consider abolishing the economic crimes bill in
accordance with IMF wishes. If it is not abolished to day, the question cannot return to
the agenda for a year by law.
May 21, 2002 [Xinhua]
- Both Argentina's President Eduardo Duhalde, and the Central bank chief Mario Blejer, have
threatened to resign because of congressional refusal to make sufficient progress towards
implement IMF-demanded reforms. In particular, the IMF requires the undoing of an economic subversion
law originally intended to cut off funding to guerilla groups, because it is being used to sue banks
on very vague charges.
May 20, 2002 [CNN]
- Argentina's Banking Association (a trade union for banking workers) has announced a
general strike for May 23, 2002 (Thursday) in response to the situation at the Credit
May 16, 2002 [CNN]
- Three banks controlled by France's Credit Agricole -- Banco Bisel, Banco Suquia SA, and Banco de Entre Rios (BERSA) -- have had their
operations taken over by state-run Banco de la Nacion Argentina, due to Credit Agricole's refusal to supply further reserves.
BERSA is expected to reopen today, while Bisel and Suquia are expected to reopen on Wednesday [May 22, 2002].
Between the three affected banks, 353 branches with about 6,000 employees are affected.
- The limits on dollar exchange are also being revised. Banks with 50 or more branches can
transact U.S.$1 million per day; banks with less than 50 branches are limited to U.S.$500,000
per day, while exchange houses will be limited to U.S.$300,000 per day.
- Scotiabank Quilmes' suspension has been renewed for another 30 days.
May 13, 2002 [CNN]
- Argentina's Senate has approved a controversial bankruptcy
law, meeting one of the IMF requirements for releasing further aid
May 11, 2002 [BBC]
- Argentina's Economy Minister Roberto Lavagna insisted that
banks would maintain full operations on Monday (May 14, 2002). He
flatly denied reports suggesting that the central bank had
intervened to support local banks, while admitting that a
government plan to free up people's savings by conversion to
government bonds and foreign corporate banking "IOUs" (bonds?) had
proven too costly. However, plans to liquidate frozen savings were
still being worked on. The possibility of directly exchanging
government property for frozen savings is being considered. [The
savings freeze was instituted under President Fernando de la Rua,
after U.S.$2.6 billion in deposits was withdrawn on Nov. 30, 2001.
Between March 2001 and November 2001, U.S.$20 billion in deposits
had been withdrawn.] Inter-American Development Bank chief Enrique
Iglesias also approved a U.S.$700 million loan to Argentina for
social programs. Also, one idea being considered to control
inflation was setting up wholesale purchases direct to
May 10, 2002 [Xinhua]
- The percentage of Argentina's population of 36 million living
at or below the poverty line was announced as reaching 50%. This is
attributed to a 35.2% inflation since Dec. 2002 (government
estimate; divergence between private sector and government has
already prevented reliable inflation estimation from abroad). 2
million of the population fell below the poverty line in April
2002. This is concentrated in the north, where the percentage of
people below the poverty line approaches 2/3rds.
May 3, 2002 [CNN]
- Argentina's Economy Minister Roberto Lavagna announced that
Argentina would pay U.S.$800 million in World Bank debts which are
due to mature next week. He expects to use central bank reserves
(currently estimated at U.S.$12 billion) and other state resources
to do so.
April 28, 2002 [BBC]
- The Argentinian peso slipped from [buy/sell rate] 2.91/2.93
pesos/U.S.$1 at close on April 30, 2002 to 3.10/3.13 pesos/U.S.$1
at open on May 2, 2002. This was attributed to the legislature's
reluctance to make changes to bankruptcy laws required by the IMF
before releasing further aid. While overall inflation appears to
have been 20% since January 2002 and 10% for April 2002, basic
foodstuffs have been subject to an inflation rate closer to 150%
since January 2002 and 30%-50% for April 2002.
April 26, 2002 [BBC]
- Argentina's banks are set to reopen on Monday, April 29 2002.
It is hoped that the deployment of riot police outside the banks
will prevent gross violent protests. There are also concerns that
farmers may refuse to deliver food to the cities.
April 25, 2002 [CNN]
- Roberto Lavagna has been named as Argentina's new Economy
April 24, 2002 [CNN/BBC]
- Argentina's Congress has passed a law that specifically
requires court orders for yielding deposits to be appealed to
Argentina's Supreme Court before they are implemented. [Keep in
mind that Argentina's Supreme Court has already ruled the
withdrawal restrictions to be government theft of property.]
April 19, 2002 [CNN/BBC]
- Jorge Remes Lenicov has resigned from his position as
Argentina's Economy Minister, since Argentina's Congress has
outright refused to consider his plan to replicate 1981: convert
60% of bank deposits to government bonds. Some banks were open
today for retirees to collect benefits; however, all other banking
and stock market functions were shut down.
April 18, 2002 [BBC]
- The Canadian owners of Scotiabank Quilmes responded to the
Argentine government's [Central Bank?] suspension of Scotiabank
Quilmes (after a bank run) by requiring that Argentina change its
banking rules before any reserves would be provided from
overseas. Later today, Argentina announced a bank holiday to last
through all of next week [at least April 26, 2002]. It appears that
about 10% of the deposits in the Argentine banking system has been
withdrawn since January 2002...which is comparable to the probable
reserve ratios of said banking system in January 2002.
April 2, 2002 [BBC]
- Mass protests by workers over not being paid started on April
17, 2002. Even government workers are not being paid. It appears
that Argentina considers the IMF requirement of cutting government
jobs to be sufficient to destroy the current government.
March 26, 2002 [BBC]
- Argentina's second-largest telecommunications firm, Telecom
Argentina [jointly owned by France Telecom and Telecom Italia], has
suspended payment on debt principal for U.S.$3.2 billion in debt.
This is thought to be the largest corporate default in Argentina
(as of this date). This follows in the footsteps of CTI Holdings
[owned by U.S.-based Verizon Communications; U.S.$1 billion,
announced last week of March 2002] and Metrogas [jointly owned by
British Gas, and YPF of Spain; U.S.$420 million].
March 14, 2002 [CNN]
- The former exchange controls have proven insufficient. After
ineffectually spending U.S.$1.2 billion (10%) in reserves,
Argentina's Central Bank has resorted to the following additional
- The Central Bank no longer sells U.S.$ at the market rate.
- The sale of dollars is limited to $1,000/individual and
$10,000/company (over an unspecified time duration), and the legal
opening hours for bureaux de change has been restricted to three
and one half hours per day.
March 13, 2002 [BBC]
- It appears that a key target for the exchange rate is 2
pesos/U.S.$1 . [This isn't just psychology. Indonesia's
import/export economy was destroyed by sudden change in exchange
rates of a factor of 3.]. Argentinian inflation estimates for 2002
are ranging from 15% (government) to 35% (high bound of EcoLatina).
Central bank intervention does not seem to be strengthening the
exchange rate beyond 2.35 pesos/U.S.$1 . Without the Malaysian Edge
(inside connections with a corporation whose dominant revenue
stream is hard currency), the police investigations of massive
(illegal) export of bank reserves indicate that any currency
defense cannot be sustained at effective levels (less than 2
pesos/U.S.$1 ) for long.
- Argentina's President Eduardo Duhalde reported that of the 10
IMF requirements for resuming aid, Argentina had already satisfied
eight. Unfortunately, two of these requirements are "impossible" to
implement at this time. [Xinhua, March 16 2002: One of the
impossible requirements is ceasing to use government and state
bonds as currency -- currently 1/3rd of the effective Argentinian
March 5, 2002 [CNN]
- It appears that the IMF is unlikely to provide assistance until
Argentina both stops printing money itself, and prevents fourteen
of its states from printing money. Unfortunately, Argentina's tax
collections have imploded, forcing Argentina to print pesos simply
to pay government workers. The exchange rate was reported at 2.5
March 1, 2002 [BBC]
- Jorge Remes Lenicov announced an option to convert U.S.$30,000
of frozen deposits into 5 or 10-year Argentinian government bonds.
The deadline for choosing to convert is said to be the end of March
2002 (March 31, 2002?).
- A pervasive medical supply shortage in Buenos Aires' public
hospitals has prompted a shutdown of all non-emergency surgery by a
group of cardiovascular surgeons. It is unclear how long this
shutdown is for.
- Government controls on milk prices apparently have made it
impossible for dairy farmers to make a profit on milk. Resulting
protests are reported to have blocked some minor highways.
February 14, 2002 [Xinhua]
- Argentine lawmakers have approved President Eduardo Duhalde's
austerity budget. This brings Argentina's actions closer to what
the IMF wants.
- Police raided Argentina's central bank in further investigation
of charges of money being illegally transferred abroad.
February 7, 2002 [Xinhua]
- Uruguay's Central Bank has ordered a 90-day suspension of
operations of Banco Galicia Uruguay, SA (totally controlled by
Argentina's Banco Galicia Buenos Aires SA) for lack of liquidity.
[More precisely, unable to meet the clients' demand to close their
deposits at the maturation of their contracts.]
February 6, 2002 [Xinhua]
- Argentina's Economy Minister Jorge Remes Lenicov announced that
the intended reopening time for Argentina's forex markets would be
next Monday (Feb. 11, 2002).
February 4, 2002 [BBC]
- Argentina's reported national debt has risen to about 90% of
GDP, from 52% of GDP in Dec. 2001.
February 1, 2002 [Fox]
- Argentina's Economy Minister Jorge Remes Lenicov announced a
package of emergency measures. This included:
- Loans taken out in dollars switched to pesos at 1 peso/U.S.$1
- Dollars deposited in banks switched to pesos at 1.4
- Full access to paychecks as soon as they hit their
- Free-floating forex markets for the Argentinian peso.
January 24, 2002 [Fox]
- President Eduardo Duhalde, faced with a (surprise?) Argentine
Supreme Court ruling calling the banking freeze unconstitutional
government destruction of Argentinian property, declared that his
government would maintain the banking freeze because it was
physically impossible to dismantle it without annihilating the
country. Argentina forex markets were to be shut down Monday and
Tuesday (Feb. 4 and 5, 2002).
January 22, 2002 [BBC]
- Argentina's Senate has passed a law (yet to be approved by the
house) that would illegalize all foreign bond payments. The wording
of this bill would make no exemptions for multinational companies,
and would illegalize the payments even if a non-Argentine branch
were to make them.
- Estimates of Argentina's GDP contraction for 2002 range
anywhere from 5% to 20%.
January 18, 2002 [BBC]
- Spain's Santander Central Hispano announced that it had written
off (all of?) its Argentinian assets, giving this bank the option
of completely shutting down all operations in Argentina.
January 11, 2002 [CNNfn]
- Argentinian police raided local offices of:
They are investigating charges that U.S.$26 billion was carried on
trucks to Buenos Aires' Ezeiza airport and illegally flown out
before bank accounts were frozen on Dec. 3, 2001.
- The international bank HSBC
- Spain's BBVA and Santander
- U.S. banks Citibank and Bank Boston
- The U.S. airline American Airlines
- The conversion rate of U.S.$ deposits to peso deposits has been
raised to U.S.$5,000 (per week?). This is at an exchange rate of
1.4 pesos/U.S.$1 . The open market rate is about 1.95 pesos/U.S.$1
- Argentina's central bank president Roque Maccarone has
resigned, nominally over his handling of government banking
regulations. He is being succeeded by his deputy, Mario
January 10, 2002 [BBC/CNNfn]
- Spain's Banco Santander and Banco Bilbao Vizcaya, which each
have about 1.5 billion euros of exposure to Argentina, are not
expected to suffer a ratings downgrade.
January 9, 2002 [BBC]
- Argentina's Economy Minister Jorge Remes Lenicov was three
hours late to a speech to delineate Argentina's current recovery
plan. The peso withdrawal limit was lifted to 1,500 pesos/week,
from 1000 pesos/week. However, U.S.$-denominated accounts were
generally frozen for a year by conversion into fixed-term deposits.
[Current accounts above $10,000, and savings accounts above $3,000,
were converted.] The banking system simply was not given enough
information to implement the opening of the planned dual-currency
market system today.
January 7, 2002 [BBC]
- Argentina delayed the reopening of its currency exchange
markets, missing a self-imposed deadline due to difficulties in
defining the operation of the currency exchange markets. The system
appears susceptible to invoicing that prices in the devaluation
(contrary to Argentina's intent).
January 6, 2002 [Fox]
- Spanish energy company Repsol is making contigency plans for a
30% reduction in 2002 profits inflicted by a proposed 25% increase
in export taxes. Repsol is also reported to have 15% of its assets
in Argentina. Also, the planned direct conversion of U.S.$ utility
bills into pesos at a 1:1 ratio is expected to cause problems for a
number of multinational utilities, including French utility giant
Suez and Spanish Endesa. Endesa is reported to have no Argentinian
assets, but to have 9% of its Brazil-based sales in Argentina.
January 5, 2002 [Fox]
- The locked exchange rate (for import, export, and capital
transactions) is officially locked at 1.4 pesos/U.S.$1 (when the
currency exchange markets reopen). This is expected to immediately
cause losses on the scale of billions of U.S. dollars for Spanish
multinational companies, including telecommunications giant
Telefonica, oil company Repsol-YPF, and the major banks Santander
Central Hispano and Banco Bilbao Vizcaya Argentaria.
January 4, 2002 [Fox]
- The Duhalde government reported that Argentina's 2001 deficit
was about U.S.$11 billion -- well in excess of the U.S.$6.5 billion
target agreed with the IMF in exchange for U.S.$8 billion in
emergency aid. It appears that loans up to U.S$100,000 will be
converted to pesos.
January 2, 2002 [BBC]
- The Duhalde government announced general plans to establish a
two-tier currency exchange market. The general intent is to lock
the rate for international corporations, while forcing individuals
to use a free-floating rate. There is also a general intent to
convert some dollar-denominated debts into pesos. There has already
been a rise in applications for Italian passports by Argentinians
of Italian descent.
December 30, 2001 [Fox]
- Eduardo Duhalde has been sworn in as Argentina's president.
Contrary to normal procedure, he is expected to serve the rest of
de la Rua's term. There are speculations that the peso would be
repegged at 1.3 pesos/U.S.$1 to 1.4 pesos/U.S.$1.
December 29, 2001 [BBC/Fox]
- Rodriguez Saa has followed his cabinet's lead, and resigned
from the presidency. It appears that the argentino only has
minority support in the Peronist political party, which presumably
would rather bankrupt most of Argentina's middle class outright
than sabotage public wages. It also became evident that Argentina's
dollar reserves backing the peso are no longer sufficient to permit
dollarization (i.e., are not there in sufficient quantities to
justify the peg). Ramon Puerta resigned immediately on grounds of
ill health, and Chamber of Deputies leader Eduardo Camano is not
expected to hold the position past Tuesday.
December 27, 2001 [MoneyCNN]
- Argentina's President Rodriguez Saa's entire cabinet has
offered to resign, in face of isolated violent protests at his
proposal of the argentino: six police officers seriously injuried
and vandalizing Argentina's Congress by setting small fires,
throwing chairs and sofas out of the main entrance, and smashing
December 27, 2001 [Fox]
- Argentinian pesos have fallen (on the black market) to about
1.4 pesos/U.S.$1 . The official forex markets remain closed by
government decree (and apparently have been since Dec. 20,
December 26, 2001 [BBC]
- It appears that the only intended backing for the argentino is
Argentinian government property (such as the presidential palace).
[This facetiously reminds me of the scene from Goethe's
Faust, where Mephistopheles suggests that gold can back
paper money before it is mined.] The prospect of being paid
in potentially hyperinflating argentinos is particularly unnerving
to public workers. Unfortunately, it's too late to accept that 13%
cut in peso wages. The earliest the argentino is expected to launch
is in about two weeks.
December 25, 2001 [MoneyCNN]
- Former Argentine President Carlos Menem has criticised the plan
to introduce the argentino, a parallel currency. Memem favors
dollarization over devaluation; it appears that the argentino is
intended to devaluate in an orderly way. In particular, the wages
for the new jobs are intended to be in argentinos.
December 23, 2001 [BBC]
- Interim President Adolfo Rodriguez Saa has announced a plan to
create one million jobs, with 100,000 jobs created in the first
week. 24,000 new jobs ranging from armed forces, to forestry work
and other public services, were to be announced Thursday. He is
making initial plans to discuss the situation with U.S. President
George Bush and Spanish Prime Minister Jose Maria Aznar.
December 23, 2001 [Fox]
- The countries with notable exposure to Argentina's defaulted
debt are South Korea and Spain. South Korea's exposure is thought
to be about U.S.$200 million. Dutch bank ING reported that most of
its 750 million euro exposure is secured, while UK investment bank
HSBC reported that its Argentine interests represented less than 1%
of its assets.
December 21, 2001 [CNN]
- Adolfo Rodriguez Saa has been named interim President of
Argentina, taking over the position from Ramon Puerta. He
immediately announced a default on all foreign debt, with the
intent to redirect the money into social and job-creation programs.
He ruled out dollarization and immediately undoing the peg of the
peso to the dollar, but intends to create a third currency which
has no anchor.
December 21, 2001 [MoneyCNN]
- Fernando de la Rua has resigned, due to the refusal of the
Peronists to form a coalition with his political party. At least
twenty people have died in the rioting, with hundreds injured and
over 2,000 arrests.
December 20, 2001 [CNN]
- Fitch IBCA has reduced its rating on Argentinian government
bonds created by the debt swap from C to CC (or is it DDD?),
indicating that default is imminent. Within the next 30 days, the
following are expected: widespread bankruptcies, bank closures, the
biggest sovereign debt default in history, and an uncontrolled
devaluation. There is some speculation on whether Argentina will
honor the traditional 35% "haircut" in its suspected-impending
December 19, 2001 [BBC]
- Argentina's Economy Minister Domingo Cavallo has resigned, in
response to the rioting. De la Rua has declared a state of seige,
and is engaged in negotiations to prevent the necessity of his
December 17, 2001 [MoneyCNN]
- Hundreds of protesters looted several suburbs of Buenos Aires,
injuring five police officers in the process. Photos associated
with the original suggested the claim "We are hungry; we want
food!" (at one rally) lacked veracity...more telling was that
Cavallo's proposed budget slashes public servant wages by 13%.
- There are concerns that the current instability in Argentina
may cause problems in Brazil (whose largest trading partner is
Argentina) and other nations with currency pegs (including Hong
Kong, Estonia and Bulgaria).
December 14, 2001 [BBC]
- Argentina's Economy Minister Domingo Cavallo has announced that
Argentina's 2002 budget will reduce spending by almost 19%, to
about U.S.$39.598 billion. [Spending for 2001 is expected to be
about U.S.$48,792 billion] The planned reduction (U.S.$9 billion)
is expected to be mostly from a massive debt-swap operation
currently in progress.
December 8, 2001 [BBC]
- Argentina has paid a U.S.$700 million installment on its
national debt today, avoiding default. Violent protests and looting
were reported. Cavallo's deputy Daniel Marx announced that he would
step down once Argentina's debt restructuring talks were
December 6, 2001 [BBC]
- The black market is no longer honoring the peso peg: the black
market exchange rate is now about 1.12 pesos/U.S$1. Cavallo is
reported to be headed to Washington D.C. for weekend talks.
December 5, 2001 [Fox]
- Argentina's economy minister Domingo Cavallo, in an effort to
locate U.S.$900 billion to stave off a debt default, has forced the
deposits of various pension funds to be converted from cash to
Argentinian government bonds.
December 4, 2001 [Fox]
- The IMF has announced that it could not complete a review of
the IMF-supported program in Argentina. This completely shuts down
all chance of Argentina obtaining U.S.$1.3 billion in assistance
that is useful in avoiding default on U.S.$132 billion in loans.
The review will be stalled until the government convinces the IMF
it has the political will to follow through on spending cuts and
take constructive action towards macroeconomic growth.
December 2, 2001 [BBC]
- Argentina's refusal to explicitly consider either
dollarization, or devaluation, has provoked the IMF into seriously
denying further assistance to Argentina: U.S.$1.3 billion. The head
of the IMF team in Argentina, Thomas Reichmann, has been recalled
to Washington -- officially normal, but the timing (right after the
bank withdrawal restrictions) is suggestive...especially since the
IMF was not consulted before this was implemented.
- Argentina's government (de la Rua) has imposed a limit on
withdrawals from banks of U.S.$1,000 per month. This is in order to
prevent a run on banks from draining Argentina of the cash
necessary to make the current debt payment. The first stage of the
debt swap appears to have been successful.
- May 20, 2002 [CNN]: The net withdrawal rate per day, before this, is thought to
have attained U.S.$50 million per day.
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